Common Pre-Bankruptcy Questions And Answers

  • What do I need to do to begin the bankruptcy process?
  • How will I know that declaring bankruptcy is right for me?
  • What property is exempt?
  • Can a business be forced into bankruptcy?
  • What happens to my home during bankruptcy proceedings? I do not want to lose my home.

What Do I Need To Do To Begin The Bankruptcy Process?

Read the Overview of Bankruptcy and schedule a consultation with the attorneys at our law firm.

How Will I Know That Declaring Bankruptcy Is Right For Me?

Learn as much as you can about the law and the process by reading the Overview of Bankruptcy and then consult with Janvier Law Firm, PLLC, to allow us to apply the law to your particular facts and circumstances.

An attorney experienced in bankruptcy law can help you determine the options that best suit your particular situation.

What Property Is Exempt?

Exempt property is simply property that you can keep and protect from your creditors when you file Chapter 7 bankruptcy. For debtors who have been domiciled in North Carolina for over two years, the exemptions per person are set below. If you have not been domiciled in North Carolina for two years, we will advise you what exemptions you have after consulting with you.

1. Residence

You may exempt up to $35,000 total equity in your residence, including a mobile home and burial plots. If you and your husband or wife own the property jointly and file a joint petition, you can claim $70,000 as exempt. Furthermore, an unmarried debtor who is aged 65 or older is entitled to retain an aggregate interest in the property not to exceed $60,000 in value, so long as the property was previously co-owned by the debtor as a tenant by the entireties or as a joint tenant with rights of survivorship and the former co-owner of the property is deceased.

"Equity" is the value of the property less all debts or liens secured by it. In certain circumstances, you may be able to exempt the entire value in a residence if you own it jointly with your spouse and have no joint unsecured creditors.

2. Motor vehicle

You can claim up to $3,500 in equity in one motor vehicle.

3. Household goods

You can claim exemptions of up to $5,000 for yourself, plus $1,000 for each dependent (not to exceed four), in items such as household furniture, clothes, jewelry, etc. You value these items at a price at which you can sell them, not at their original cost or replacement value.

4. Tools of trade

You can exempt $2,000 of equity in "tools of the trade."

5. Wild card

A wild-card exemption is available to exempt any property. The amount of the wild-card exemption is affected by the amount, if any, you claim under the $35,000 residence exemption. The wild-card exemption is $5,000 and is claimed out of the unused portion of the residence exemption.

For example, if the exemption you claim in a residence is less than $30,000 you have a $5,000 wild-card exemption. If you claim $32,500 exemption in your residence, you have a $2,500 wild-card exemption. This exemption is usually used to exempt equity in a car above $3,500, money in the bank, tax refunds not yet received and cash on hand.

6. Life insurance

Life insurance policies insuring the life of the debtor in which his or her spouse and/or children are named beneficiaries are totally exempt, regardless of the value.

7. Health aids

You can claim an unlimited amount of professionally prescribed health aids for the debtor or a dependent of the debtor (e.g., wheelchair, hearing aid and the like).

8. Compensation for injuries

Compensation for personal injuries and workman's compensation is exempt.

10. Retirement benefits

There are no dollar limits here. IRA accounts and retirement benefits of North Carolina for teachers, state employees, local government employees and federal civil service employees are exempt. Individual retirement accounts are exempt. Retirement benefits of other states or governmental unit of other states are exempt to the extent that they are exempt under the laws of that state. Your interest in an ERISA-qualified retirement plan (401(k) account, pension or profit-sharing plan) is also protected from your creditors.

11. Government benefits

Veterans Administration, Social Security and AFDC benefits are exempt.

12. Wages

Your earnings for personal services rendered within 60 days of filing the bankruptcy, which are necessary for the support of you and your family. Such earnings remain exempt even though they have been deposited in a bank account.

13. Alimony and child support

Alimony, support, separate maintenance and child support payments that are part of a divorce or separation agreement to the extent they are reasonably necessary for the support of the debtor or a dependent of the debtor.

14. Tenants by the entirety

Any real estate (not just a residence) owned by a husband and wife jointly as tenants by the entirety is exempt from any creditor who has a claim against just the husband or wife. It is not exempt from a creditor who has a joint claim against both the husband and wife. If you own real estate jointly with your spouse with a large amount of equity, it may be crucial to know what joint debts you have with your spouse.

15. Other

Other specific benefits and property are exempt. When you consult with us, we will identify such exemptions properly.

Can A Business Be Forced Into Bankruptcy?

Yes. Although very uncommon, creditors can initiate an involuntary bankruptcy proceeding against a business or individual. This occurs in infrequent situations when creditors are concerned that the debtor's business is squandering or misappropriating assets that should otherwise go toward paying debts owed to them.

What Happens To My Home During Bankruptcy Proceedings? I Do Not Want To Lose My Home.

Most people who file bankruptcy keep their homes. In fact, many people file bankruptcy to keep from losing their home, and the decision on whether to file Chapter 7 or Chapter 13 reveals the best way to keep the home.

In Chapter 7, you keep your home so long as you remain current with the payments on the mortgage(s), and the amount of equity is no more than the exemption amount (see question on exemption amounts).

If you are not current with your payments or if the amount of equity exceeds the exemption amount, you file Chapter 13 to resume making regular payments, catch up payments and pay the nonexempt equity of your other creditors over the term of the Chapter 13 plan.

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Have questions about life after bankruptcy? See our second FAQ page where we outline commonly asked post-bankruptcy questions.

Have Questions Specific To Your Situation?

We encourage you to contact Janvier Law Firm, PLLC, in Raleigh, North Carolina, to learn more about your debt relief options. We have more than 30 years of combined experience and a team of attorneys whose main mission is to help you live your life debt free,

If you'd like to schedule an initial consultation, call 919-301-0628 or contact us online.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.